The Impacts of Hong Kong's Currency Board Reforms on the Interbank Market

28 Pages Posted: 20 Sep 2001

See all articles by Yiu Kuen Tse

Yiu Kuen Tse

Singapore Management University - School of Social Sciences

Paul S. L. Yip

Nanyang Technological University (NTU) - Centre for Research in Financial Services (CREFS)

Date Written: July 2001

Abstract

Among the economies with a Currency Board System, Hong Kong is probably the one with (a) the largest and most developed financial sector, and (b) the highest capital mobility. Hence, studying Hong Kong's Currency Board System is not only crucial to Hong Kong, but also important for the understanding of the modern Currency Board System. This paper outlines the major monetary reforms in Hong Kong since the late 1980s. The impacts of these reforms and the 1997/98 Asian Financial Crisis are then examined empirically. We focus on the differentials between the US and Hong Kong interbank interest rates. Generalized autoregressive conditional heteroscedasticity (GARCH) models are used to capture the time-varying level and volatility of the differentials. In light of the empirical results we provide an assessment of the reforms in Hong Kong.

Keywords: Currency Board System, conditional heteroscedasticity, interbank rate

JEL Classification: E42, E58

Suggested Citation

Tse, Yiu Kuen and Yip, Paul S. L., The Impacts of Hong Kong's Currency Board Reforms on the Interbank Market (July 2001). Available at SSRN: https://ssrn.com/abstract=283790 or http://dx.doi.org/10.2139/ssrn.283790

Yiu Kuen Tse (Contact Author)

Singapore Management University - School of Social Sciences ( email )

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HOME PAGE: http://staff.mysmu.edu/yktse/yktsehp.htm

Paul S. L. Yip

Nanyang Technological University (NTU) - Centre for Research in Financial Services (CREFS) ( email )

Nanyang Avenue
Singapore, 639798
Singapore
+65 790-4983 (Phone)
+65 791-3697 (Fax)

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